The expression "levy" used in the third proviso to S.9(2) of the Indian Income-tax Act, 1922, means "impose" and not "collect".

FACTS : - The Zorastrian Building Society Ltd., Bombay, (assessee), owned certain buildings which were let out to tenants. For the assessment year 1951-52 the Income-tax Officer disallowed deduction on account of urban immoveable property tax on the ground that it was, tax levied by the Bombay Government and not by the local authority. The assessees case was that the Urban immoveable property tax was levied and collected by the Municipality and paid to the Provincial Government and that, therefore, it was entitled to deduction under the second proviso to S.9(2) of the Indian Income-tax Act, 1922. On appeal the Appellate Assistant Commissioner upheld the Income-tax Officer.

2. The Appellate Tribunal upheld the contention of the assessee.

3. The following question of law was referred to the High Court:

"Whether on the facts of the case the assessee is entitled to claim deduction of half of the urban immoveable property tax under the third proviso to S.9(2) of the Income-tax Act from its income from property?"

CHAGLA, C.J. :-

4. The question that arises in this reference is whether the assessee is entitled to deduct half the urban immoveable property tax for the purpose of determining the bona fide annual value of the property belonging to the assessee. This question can be determined on a construction of the third proviso to S.9(2) of the Indian Income-tax Act and that provides :

"Provided further that where the property is in the occupation of a tenant and the taxes levied by any local authority in respect of the property are under the law authorising such levy, payable wholly by the owner or partly by the owner and partly by the tenant-

(a) one-half of total amount of such taxes or one-eighth of the annual value of the property, whichever is less, shall, notwithstanding anything contained in such law, be deemed to be the tenants liability of such taxes, and

(b) in determining the annual value of the property with reference to the rent payable by the tenant, a deduction shall be made equal to the part, if any, of the tenants liability which is borne by the owner."

Therefore, before a deduction can be made for the purpose of ascertaining the bona fide annual value, the conditions necessary are : (1) that there must be a tax levied by a local authority, (2) the tax must be levied by the local authority under some law which authorises the local authority to levy the tax, and (3) that exemption which can only be upto one half, can only be claimed provided the landlord discharges any part of the tenants liability with regard to that tax, which is deemed to be one half.

5. Now, the whole question turns on the meaning to be given to the expression "levied". It is contended by the Department that "levy" in this context means "impose" and it is contended on behalf of the assessee by Mr. Palkhivala that "levy" means "collect". It is undoubtedly true that "levy" has been used in both senses depending upon the context in which the expression is used, and what we have to decide is whether in the context in which this expression is used it means "collect" or it means "impose". Now, this urban immoveable property tax in respect of which exemption is claimed by the assessee was imposed by the Bombay Finance Act, 1932, and the charging section is S.22 which provides that there shall, subject to the provisions of S.23, be levied and paid to the Provincial Government a tax on buildings and lands hereinafter called the urban immoveable property tax.

The Legislature having levied this tax, it set up a machinery for the collection of the tax and the agent that it appointed for collection of the tax was the Bombay Municipality. Section 24AA provides :

"The collection of the Urban Immoveable Property tax under S.24 and the recovery of the penalty under S.21A on behalf of any municipality shall be made by the appropriate municipal authority appointed to collect the property tax on behalf of such municipality under the law under which such municipality